Here in the U.S., we mostly think of taxes in terms of what we earn. The federal government, usually your state, and sometimes even your city take a percentage of your earnings to finance their operations. But what if we were taxed less on what we earn and more on what we consume? That’s the basic idea behind the value-added tax, or VAT, which is a type of consumption tax currently in place in more than 140 countries around the world, including every major Western country except the United States.

But some of you may be asking yourselves if we already taxed on consumption. In short, yes. Average sales tax in the United States is nearly 10 percent and like a VAT, sales tax is certainly a consumption tax. But here’s the difference: unlike sales tax, which only applies to the final retail transaction with the consumer, a typical VAT taxes each stage of production, while giving a credit for taxes already paid.Read All »

Last year we travelled to Chicago, Ill., which privatized its parking meters in February of 2009 and to the city of Harrisburg, Pa., which is considering leasing its parking facilities to help pay down a staggering amount of municipal debt.

As the year starts, Chicagoans have gotten another reminder of why the parking meter lease has been so deeply unpopular. As Chicago enters the fourth year of its 75-year deal, fees have once again increased. Meter rates have risen from $5.00 an hour to $5.75 an hour in the central business district, effective twenty-four hours a day.

Meanwhile in Harrisburg, the financial fortunes of Pennsylvania’s capital city have become much more complicated. After rejecting the Mayor’s financial recovery plan, the City Council filed for Chapter 9 municipal bankruptcy, against the mayor’s wishes. However, a federal court judge has since thrown-out the bankruptcy filing and the state has appointed a receiver, attorney David Unkovic, to take over the Harrisburg’s finances and implement a plan to pay the more than $300 million dollars in debt that the city owes.

Although the City Council rejected a plan to lease the parking system in 2008, a lease or sale of Harrisburg’s parking system, along with the sale of the trash incinerator that is the primary cause of the city’s crippling debt, appears likely to be included in any fiscal plan for Harrisburg. Leasing the parking system for an infusion of money upfront was included in both the State’s and the Mayor’s financial recovery plan.

But the new Harrisburg receiver, who has until February 6 to develop a plan, has pledged to be open-minded regarding city assets in looking for a solution. In an interview with the Patriot-News Editorial Board, receiver Unkovic said, “I am not coming into this with any assumptions. I am willing to hear which assets people think should be sold or leased.” And he added that, “one of my fundamental assumptions is that it is better off for the city if they lease or sell fewer assets rather than more assets.”

After weeks of public backlash, Bank of America announced today that it would cancel plans to charge a $5 monthly transaction fee for debit card purchases.

The bank has been under fire since it announced the fee in late September, further fueling the air of general distrust in major U.S. banks that has become increasingly palpable in the wake of the Occupy Wall Street protests. Earlier this month, Citibank also announced that it would be raising the minimum balance requirement for checking and savings accounts to avoid a monthly fee of $15 or $20, depending on the type of account. Bank of America has cited the so-called “Durbin Amendment” of the Dodd-Frank Act as the reason for imposing the debit card fees. The amendment, which the Senate passed last year, reduced the fees charged to merchants on debit card transactions, thereby limiting banks’ revenue from those purchases.Read All »

President Obama, finishing up a three-day tour through western U.S. states, announced a new plan Wednesday to ease the burden of student loans on Americans in debt.

Under these new measures, those who have two kinds of student loans – direct federal loans and government-backed private loans – would be able to consolidate them with a 0.5 percent decrease in their interest rate. Furthermore, the plan expands the government’s current income-based repayment program, which currently allows debtors to pay 15 percent of their monthly income and have their loans forgiven after 25 years. The program was scheduled to lower the bar in 2014 to 10 percent of discretionary income with loan forgiveness after 20 years, but Obama’s executive action would allow those new payment caps to go into effect in 2012 instead.

The move is part of Obama’s “We Can’t Wait” campaign, an effort to usher in executive actions to relieve financial burdens and spur the economy as Congress stalls on passing the president’s American Jobs Act. On Monday, Obama also announced plans to expand the government’s mortgage refinancing program to help “underwater” mortgage owners more easily pay off their debts.

Observers have noted that both the mortgage refinancing and student debt plans only offer modest relief for the bulk of indebted Americans; the Atlantic calculates that the average student loan borrower would save a mere $10 a month under the changes. Clearly, the newly announced measures fall far short of the kind of sweeping changes that many Americans are hoping for – but as long as gridlock remains between Congress and the president, sweeping change will likely be difficult to come by.

College tuition throughout the country has risen by an alarming rate over the past decade, and the economic downturn has made it much more difficult for recent college graduates to attain jobs with salaries that give them the ability to keep up with monthly loan payments. As student debt approaches the $1 trillion mark, having surpassed the aggregate amount of credit card debt in America earlier this year, debt-burdened Americans have begun to more vociferously rally against rising tuition costs, high interest rates and lack of employment. A study by the College Board released today found that tuition at public universities rose by 8.3 percent this year alone — twice the rate of inflation — while tuition at non-profit private universities rose by 4.5 percent. Student debt continues to be one of the most prominent narratives of the Occupy Wall Street protests, while some analystshave expressed fears that student debt may be the next subprime mortgage crisis.

“In the end, this is not about growing the size of government or relying on the free market,” Obama said in his speech, delivered in Colorado Wednesday afternoon, “because it’s not a free market when we have a student loan system that’s rigged to reward private lenders without any risk. It’s about whether we want to give tens of billions of tax dollars to special interests or whether we want to make college more affordable for eight-and-a-half million more students. I think most of us would agree on what the right answer is.”

Faced with a rigidCongressand the stalling of the American Jobs Act (pdf),President Obama has begun the process of unveiling several executive measures aimed at stimulating the downtrodden economy. On Monday in Las Vegas, one of the cities where the housing crisis hit hardest, President Obama announced an overhaul of a government mortgage refinancing program.

The plan expands the Home Affordable Refinancing Program (HARP), an existing but little-used program that began two years ago with the aim of helping “underwater” mortgage owners – those whose mortgages are currently valued at less than the mortgage they are paying off — lower their interest rates. The new plan loosens some of HARP’s restrictions in an effort to encourage more Americans to take advantage of the program. When the program rolled out in 2009, it targeted an estimated 5 million Americans to assist in mortgage refinancing, but to date, fewer than a million people participate in it.

“Say you have a $250,000 mortgage at a 6 percent interest rate, but the value of your home has fallen below $200,000,” President Obama told the Nevada crowd on Monday. “Currently, you can’t refinance. You’re ineligible. That’s about to change. If you meet certain requirements, you will have the chance to refinance at lower rates, which could save you hundreds of dollars a month, and thousands of dollars a year in mortgage payments.”

The “certain requirements” that must be met include being employed and being current on mortgage payments. Previously, the program was limited to those whose loans were at most 25 percent larger than their mortgage value, but the new plan eliminates this barrier. Obviously, however, even with eased restrictions, the new plan does not provide assistance to those in foreclosure or those who are delinquent on their payments – the ones with the most need.

Many observers have noted that any relief or stimulus gleaned from HARP will be modest at best. At the Houston Chronicle, blogger Loren Steffy called the refinancing plan “a little like throwing struggling homeowners a life preserver filled with small rocks or perhaps lead.”

“A mass refinance program is long overdue,” Steffy writes, “and the administration continues to dither with tweaking the HARP program which was supposed to reach 5 million homeowners two years ago and instead has helped fewer than 1 million.”

Obama himself has emphasized that the refinancing overhaul is by no means a solution to America’s housing problem.

“Given the magnitude of the housing bubble, and the huge inventory of unsold homes in places like Nevada, it will take time to solve these challenges,” he said. “We will still need Congress to pass the Jobs Bill – and even then, the housing market won’t be fully healed until the unemployment rate comes down and the inventory of homes on the market comes down. But that is no excuse for inaction.”

Student loan defaults are on the rise, according to data released last week by the Department of Education. In the fiscal year ending September 30, 2010, 8.8 percent of borrowers defaulted on their student loans within two years, up from 7 percent the year before. This marks the highest default rate for student loan borrowers in more than a decade, although The New York Times notes that the rate spiked to 20 percent in 1990.

The Department of Education’s report reveals that the trend is particularly troublesome for those graduating from for-profit colleges, where the default rate rose from 11.6 percent in 2008 to 15 percent in 2009. In contrast, the default rate was 7.2 percent for graduates from public colleges and 4.6 for not-for-profit colleges.

Some of the problems underlying the spike in student loan defaults are obvious. The troubles facing the U.S. economy have been particularly hard on recent college graduates, who face fierce competition for entry-level jobsand few options outside of low-skill and low-wage work that can depress their incomes for years. The rising default rates also add to growing concern over for-profit colleges, whose students comprise nearly half of all the defaults. Critics say that for-profit college recruiters target low-income and minority students that bring in money from federal financial aid, but face high debt and low job prospects upon graduating. New federal guidelines restrict federal aid to for-profit schools where less than 35 percent of former students are making their loan payments each month.

But another lesser-known problem with rising defaults is that many students simply aren’t aware of loan repayment options that exist. A repayment program started in 2009 caps monthly payments at 15 percent of borrowers’ incomes, giving low-wage earners a bit more breathing room in paying back their debt than standard monthly payments normally allow. Borrowers who make monthly payments over a period of 25 years can have the rest of their loans forgiven. Those making less than 150 percent of the poverty line – $22,314 for a family of four and $11,139 for an individual as of 2010 – would be able to make monthly payments of zero dollars. The program’s low enrollment rate suggests that schools and the Department of Education are not advising students about loan repayment options as effectively as they could, particularly to low-income students who need the most assistance. The Department, however, has stated that it is taking steps to expand their outreach efforts for the program.

Traders gather on the floor of the New York Stock Exchange Friday, July 29, 2011. Photo: AP/Richard Drew

The recovery from the Great Recession – technically December 2007 to June 2009 – has been described a lot of different ways, none of which are particularly encouraging: sluggish, weak, jobless and even anemic. But what if it hasn’t been a recovery at all?

This morning the U.S. Commerce Department released new data that showed that real GDP – “the output of goods and services produced by labor and property located in the United States – increased at an annual rate of 1.3 percent” from April to June of this year. While this is technically growth and not contraction, the numbers were less than what economists expected and clearly a disappointment when markets are already skittish over debt limit drama in Washington, D.C. But adding to the bad news, the Commerce Department also released revised data that showed the amount of growth during the “recovery” had been overstated.Read All »

The plight of the long-term unemployed has been thoroughly and heartbreakingly documented since the nation fell into an economic recession in late 2008. Benefits run out before new jobs are found, age discrimination abounds among employers and health care costs continue to soar. The New York Times recently reported on yet another reality for the long-term unemployed: hiring biases against unemployed candidates.

Most job seekers are already cognizant of the fact that unemployed applicants are often at a disadvantage. But the National Employment Law Project, a nonprofit organization surveying the labor market, scoured through listings at job sites CareerBuilder, Monster, Craigslist and Indeed, and found 150 ads requiring applicants to be currently or recently employed. The practice of overtly excluding unemployed applicants has apparently become so widespread that New Jersey recently passed a law to prohibit employers from excluding unemployed candidates in the application process.

Having a long gap in your resume has always been a problem, and having a long current gap has always been a really big problem unless there’s a mighty convincing explanation for it. The difference today isn’t that employers have changed, it’s that they’re so swamped with job applications that they figure they might as well just admit their biases up front.

Moreover, Drum notes, the recession has caused the pool of long-term unemployed workers, particularly in the middle-aged set, to greatly expand.

The perception that the long-time unemployed candidate languishes while their employed counterparts build their skills and keep up-to-date with current trends is a primary factor in employers’ hiring bias. Moreover, the image of a job seeker that has been unemployed for months or even years tends to invoke a fear that some other unknown factormust render the candidate undesirable. Whether this perception has any merit is a different matter. As a reader sarcastically remarked in response to the New York Times article, “This is exactly why I won’t date a woman who is not already married. If she’s still single there’s probably a very good reason.”

Yesterday, the Pew Research Center released a study declaring that the housing market crash leading up to the economic recession widened the racial wealth gap between whites and minorities, particularly black and Hispanic Americans. Hispanics as a group faced the largest wealth decline during this period, with the median wealth of Hispanic households dropping by 66 percent. The Pew study, using data taken from U.S. census figures from 2005 to 2009, revealed that the current racial wealth gap caused by the recession is the widest it has been since the U.S. census began tracking data on wealth disparities in 1984.

Underneath these numbers are a lot of personal tragedies. And I think the nightmare experience of losing what seemed briefly to be significant wealth has the potential to reduce Hispanic immigration over the long haul.

MSNBC’s Sylvie Stein and Domenico Montanaro note that the trend seems to have had little impact on minorities in Obama’s support base:

Still, despite these data and Republicans, like Michele Bachmann and Mitt Romney pointing out how minorities have been adversely affected in this economy, blacks and Hispanics appear firmly in Obama’s corner.

Embedded in the wealth gap study is the fact that those median net worth figures for white households are horribly skewed by the fact that almost all of the richest people in America are white … The average white person isn’t actually doing twenty times better than the average black person.

Kai Wright at Colorlines magazine analyzes the more systemic causes of the wealth gap:

Black and Latino families are also far more likely to live in places crawling with expensive, deceptive consumer lending of all sorts, from car loans to refinance mortgages. They are more likely to turn to that lending because they make less money and because they already hold less wealth to cushion themselves in tough times. It’s an ugly cycle: inequality across the economy creates demand for predatory credit to bridge the gap, which in turn worsens inequality.

Need to Know is a production of Creative News Group (CNG) in association with WNET. Marc Rosenwasser is Executive Producer. Need to Know is made possible by Bernard and Irene Schwartz, Mutual of America, Citi Foundation, John D. and Catherine T. MacArthur Foundation, Miriam and Ira D. Wallach Foundation, Margaret A. Cargill Foundation, The Corporation for Public Broadcasting and PBS.